How can the adoption tax credit help me?

Just recently CCAI released our inaugural ‘CCAI In Focus’ report on the Adoption Tax Credit. While everyone was hastily working to click “submit” on the IRS website before 11:59pm on April 15th, we thought it would be a great idea to share some positive tax news. The federal adoption tax credit has been around for some time, but considering there have been some changes, most recently by President Obama’s health care legislation, we wanted to clarify a misconceptions and raise considerations that still remain.

This report was written primarily to serve federal policymakers, but has also proven useful to the adoption community in informing adoptive parents and advocates about this adoption incentive. The report includes the following information:

a brief overview of the adoption tax credit

a detailed legislative history

policy considerations

a list of adoption tax credit legislation that is currently pending on Congress

Despite that this credit has been around for 14 years, affordability of adoption continues to be an issue for some families. Adoption Fees can range from $0-$2,500 for foster care adoptions, up to $25,000 for private domestic adoptions, and upwards of $40,000 for intercountry adoptions. The below chart details data from a small sample of adoptive parents CCAI surveyed:

Responses from parents who attempted and/or completed an adoptionResponses from parents who attempted and/or completed an adoption

What is most shocking is that while the Adoption Tax Credit was initially created to encourage foster care adoptions, only 25% of all public adoptions took advantage of this incentive, whereas nearly all foreign adoptions were support by this credit. Another interesting point is that families whose intercountry adoptions fail are not able to receive this tax credit, whereas all domestic adoptions–even if the adoption never finalizes–are able to receive this credit.

There are two main policy considerations that are a result of the new provisions in President Obama’s health care legislation that was signed into law last month. This law 1) extends the Adoption Tax Credit through December 31, 2011, 2) increases the credit by $1,000 to $13,170, and 3) for the first time makes the tax credit refundable so that families who do not have tax liabilities will be able to take advantage of this incentive. Please refer to the report for more detailed information, and stay tuned for additional CCAI In Focus reports on hot topics related to adoption and foster care.

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The Congressional Coalition on Adoption Institute is a nonprofit, nonpartisan organization dedicated to raising awareness about the millions of children around the world in need of permanent, safe, and loving homes and to eliminating the barriers that hinder these children from realizing their basic right of a family.
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CCAI’s Mission

The Congressional Coalition on Adoption Institute (CCAI) educates and advocates to raise awareness of the needs of children without families. By convening policymakers, issue experts and individuals with direct foster care or adoption experience, CCAI works to ensure that every child knows the love and support of a family.

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